Question

Last month CyberGames, a computer game retailer, had total sales of 1,450,000 , selling expenses of 210,000 , and administrative expenses of 180,000. The company had beginning merchandise inventory of 240,000 , purchased additional merchandise inventory for 950,000 , and had ending merchandise inventory of 170,000 .
Required:
Prepare an income statement for the company for the month.

Answer 1

An income statement for the company for the month of cybergames is shown below.

For income statement we first have to calculate cost of goods manufactured.

                                             CyberGames

                        Schedule of Cost of Goods Manufactured

Particulars                                                    Amount (in $)   Amount (in $)

Direct materials:

Beginning raw materials inventory ................ 240,000

Add: Purchases of raw materials...................  950,000

Raw materials available for use.................... 1,190,000

Deduct: Ending raw materials inventory ......... 170,000

Raw materials used in production ................                           1,020,000

Direct labor......................................................                                      0

Manufacturing overhead ...................................                                   0

Total manufacturing costs.................................                        1,020,000

Add: Beginning work in process inventory..........                                    0

                                                                                                 1,020,000

Deduct: Ending work in process inventory .........                                   0

Cost of goods manufactured .............................                       1,020,000

Since we are given no information about work in progress and manufacturing overhead we assume it to be zero.

                                             CyberGames

                                          Income Statement

Particulars                                                   Amount (in $)    Amount (in $)

Sales ........................................................                             1,450,000

Cost of goods sold:

Finished goods inventory, beginning............... 240,000

Add: Cost of goods manufactured .............. 1,020,000

Goods available for sale .............................. 1,260,000

Deduct: Finished goods inventory, ending..     170,000         1,090,000

Gross margin ..................................................                          360,000

Selling and administrative expenses .................                        390,000

Net operating income (loss)......................................                 (30,000)

Hence, CyberGames incurs a loss of 30000 for the given information.

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